2021 BUDGET IMPLICATIONS FOR INCOME TAX

As expected, the 2021 budget announcement did not offer too many income tax changes after the Covid budget of last year.

The main changes that will affect individuals and businesses are set out below:

Individuals

Low and Middle Income Tax Offset

The LIMITO (low and middle-income tax offset) is extended to 2021-22 years. It provides a maximum offset of $1,080 for taxpayers with taxable income from $48,000 to $90,000. A lesser LIMITO offset is available to taxpayers with a taxable income below $48,000 or taxable incomes from $90,000 to $126,000.

Self Education Expenses

$250 threshold to be removed

Businesses

Extension of Full Expensing

The temporary full expensing measure entitles businesses with an aggregated turnover of under $5 billion to an immediate deduction for ‘eligible capital assets’ acquired from 7.30pm AEDT on 6 October 2020, that are first used or installed by 30 June 2022. Assuming that the proposed changes are legislated, the 30 June 2022 deadline (to use or install the capital asset) will be extended to 30 June 2023.

LOSS CARRY BACK

The loss carry-back measure amended the tax losses regime to temporarily allow eligible corporate entities (with a turnover capped at $5 billion) to use losses that are incurred in the income years 2019-20, 2020-21 or 2020-22 to be retrospectively applied against profits made in the 2018-19 year or later years. If the proposed changes are legislated, the measure will also apply to losses incurred in the 2022-23 income years.

Superannuation

Work Test Repeal Further, the Government will repeal the ‘work test’ and allow individuals aged 67 to 74 years (inclusive) to make or receive non-concessional or salary sacrifice superannuation contributions without having to work at least 40 hours over a 30-day period in the relevant financial year.

Individuals aged 67 to 74 years will still have to meet the work test to make personal deductible contributions

Should you have any questions regarding any of the above or anything contained in the budget please contact MCA on 9923 2959.